Life after ‘Clunkers’

Used-car dealers say program hurt their business

September 13, 2009

JOHNSTOWN - The ripple effect of the government's Cash for Clunkers program is still being felt throughout the local automotive world, as new car dealerships attempt to figure out how to handle the lack of urgency among buyers and used-car dealers attempt to make sense of the program.

New car dealerships, which are owned by larger car companies such as Ford and Chrysler, say the government has begun to refund them the money they were owed after they completed a Cash for Clunkers transaction.

"The money is not flowing as fast as we would like, but it is flowing, and it looks like the obligations are being honored," Brown's Ford of Johnstown owner Jeff Brown said. "We're cautiously optimistic we'll get funded on all of our deals."

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The Leader-Herald/Zach SubarFagant’s Auto Sales & Service Shop Manager Carl Schilling works on a car in his Johnstown shop Thursday.

But while the U.S. government, President Barack Obama and some new-car dealers have touted the program's success, used-car dealers say the program has not necessarily helped them.

For a variety of reasons, the used-car dealers said the program unfairly pushed people into new-car dealerships, took cars off the road they might have otherwise looked to sell one day, and tilted the market favorably toward the large companies that lend their name to the dealerships.

"It pushes them in while they're there and pushes them in to buy other vehicles. I'm not saying it's wrong, but it affects guys like us," said Louie Fagant, owner of Fagant's Auto of Johnstown. "You have to look at the negative side effects. There's a lot more used-car guys out there like myself who sell the newer stuff, and we get affected in a negative way."

Some cars traded in as part of the program were still usable, according to Nethaway's Motorcar Co. of Gloversville owner Ken Nethaway, and could have eventually been sold by used-car dealerships.

Fagant said many used-car shops also do repair work on older cars, and said he has already lost about eight customers who generally bring in their cars for repair work but ended up trading them in through the program.

Another component of the program, Fagant said, involves the clunkers' motors. The motors must be destroyed, which Fagant said will hurt business, since normally they could be sold.

All in all, Fagant said, removing such a large number of cars from the road so quickly might not necessarily be a good thing for the economy.

"Cash for Clunkers didn't help any of the used-car dealers," Nethaway said. "For a used-car dealer, there's not much of a story, except there wasn't any value."

At this point, new-car dealers also say the commotion that existed in new-car dealerships when Cash for Clunkers was going on is not necessarily there anymore.

"There's not the sense of urgency that there was," Brown said.

Still, car dealers say the new car market may be doing a little better than it had been last year or earlier this year. Brown said low gas prices and low interest rates are helping his effort, and said demand, at this point, is continuing to exceed supply.

"Consumer confidence does seem to be improving," he said. "People are buying vehicles they want instead of need."

Those vehicles, he said, include leather interiors or other add-ons customers had not been requesting as often earlier in the year. He said requests for such items began to increase in earnest toward the beginning of the summer.

At this point, dealers still hold out hope they will soon get their money back. Dealers were required to front the roughly $4,500 rebate owed to car buyers for each sale they made under the program, with the promise the government would reimburse them.

"I'm hearing that they've gone from 200 people handling these deals to something like 2,000, and still they're not able to handle the traffic," H&P Motors of Gloversville owner Alex Isabella said. "But we did have another deal accepted this week, so it's moving along slowly. It's probably going to be [until the] end of this month."

Fagant said he is just trying to keep his head above water at this point, though he said business continues to hold steady.

My business is not as bad off as a lot of [others]," he said. "But it's not good like it should be this time of year."